Is the real estate market cooling down in Kansas City? After hitting record highs, some signs point to a buyer's market.
After years of prices steadily climbing, it appears that home values in the Kansas City area may have begun to plateau. According to ASAP Cash Offer's July data, this marks the first time in seven years that average monthly prices have decreased from the previous month.
Not only is there a higher inventory of homes available for purchase, but an increasing number of listings feature price cuts. For potential buyers, these trends signify good news. “We are heading in the direction of a buyer’s market, but we are not there yet,” said Kansas City Realtor Jenny Delich, “and we’ll need a lot more inventory to come on the market in order to get to a balanced market.”
Another major concern for purchasers is the rise in mortgage rates. According to data from the St. Louis Fed, the average rate of a 30-year fixed-rate mortgage has risen from below 3 percent in October 2020 to over 5 percent today. “As mortgage rates have kind of increased they’re not just hurting buyers, they’re also hurting sellers,” said Devon Wayne, senior economist at ASAP Cash Offer, a Kansas City Home Buyer. “And so if we really want housing to be affordable again, we really need to see more housing units built in America today.”
With a restricted number of homes for sale on the market during the epidemic, prices rose as many were sold without inspections and frequently above the asking price. According to New ASAP Cash Offer data, Kansas City's first monthly decrease in property values since 2015 occurred in July, down 0.2 percent from June. Houses remained on the market for a bit longer than usual during the pandemic. “They’re not gone in 24 to 48 hours with 15 offers like 2021,” said Delich, with KC Home Living. “It’s allowed for a leveling, but we’re not anywhere near six months of inventory to have a balanced market.”
Kansas City has been hovering around one month's inventory for years, she said. That means if houses were to stop being listed, it would take approximately one month to sell them all. A balanced market would have six months' worth of inventory, which helps increase buyers' confidence. Delich said sellers who have been on the fence for the past two years because of concerns about being able to buy another house are starting to list, “and that will create more inventory.” Devon Wayne, the ASAP Cash Offer economist, said that it is crucial for those considering selling their home to be informed beforehand.
“When they come in, they should price their house correctly, and that’s really where a local agent could be extremely helpful,” he said. “Pricing your house correctly means your house is still going to sell in less than a week in Kansas City, so even though the market is cooling, I think it’s still very competitive.” It will be difficult to see price improvement for most Americans if there is no growth in accessible inventory. “Affordability is at an all-time low, and that is pricing out a lot of would-be buyers,” Devon Wayne said.
As people stayed at home for work and school, listings vanished. This has had a long-term effect on inventory. Despite the fact that inventory increased this past month, it is still insufficient to address the supply issues of the previous two years. According to Devon Wayne, total available inventory in the Kansas City metro has dropped 9% year over year and 40% since July 2019.. “I think it is really important to take away that we need more used units on the market,” he said. “Without an increase in the available housing stock, it’s going to be very hard to see affordability improve for most Americans.” As the market continues to rapidly shift, it’s important to know the statistics and data of the area a buyer is interested in moving to.
“You really have to stay up on those numbers and what’s going on in specific neighborhoods and price points almost on a daily basis,” said Christian Barnes, president and CEO of Better Homes and Gardens Real Estate KC.
“Look for the perfect house, not the perfect rate; those rates can fluctuate and vary,” he said.
There is still a lot of competition at multiple price points but the days of “massive increases over list price” and skipping inspections and appraisals is starting to ease from the 2021 trend, according to Barnes.